Legal Question in Business Law in California

Partner in business breaches verbal partnership

I started working for an individual and his wife in April 2005. Around June he offered my wife and I partnership in a business and we accepted. Over the past few monthes we helped build up the clientell and production of the business. We all came to an agreement that the business should become an LLC. The accountant was supose to get the paper work ready for final preperations and send them in. As of this time my wife and I don't know how much of that she has done but we plan on finding out. In the meantime the individual and his wife (our partners) were not holding up there end of the verbal agreement. We found out that they were spending excessive amounts of the gross profits. I have put in excessive amounts of my time, effort, and money into this business getting nothing back. We went into work the other day and our parner had come to the decision that they no longer require our assistance. Many upstanding business people in the community know that we were patners in this business. Since they are letting us go and backing out of the verbal contract to be partners I would like to know if there is any action we can take against them? Your help would be very much appriciated.

Thank you for your time,

Skyler


Asked on 12/16/05, 1:30 am

4 Answers from Attorneys

H.M. Torrey The Law Offices of H.M. Torrey

Re: Partner in business breaches verbal partnership

Yes, you do have actionable claims herein. Even if the agreement was never in writing, the Courts can still fashion remedies where detrimental reliance on the oral agreement happened, and the other party was unjustly enriched as a result. If you would like further assistance in this matter, contact us directly for a free consultation.

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Answered on 12/16/05, 8:31 am
Wayne Wisong Wayne Wisong, Attorney at Law

Re: Partner in business breaches verbal partnership

I concur that it sounds like you have potentially meritorious claims on at least three theories as aforementioned, and the fact the agreement was oral is itself not a bar. In this kind of case, however, one of the things you are probably going to need to sue for is an accounting, in order to establish and prove the amount of profits you should have received.

Feel free to contact me for further free consultation. If the magnitude of loss is significant, I consider taking cases like this on a contingent fee basis. For west coast clients, I usually don't charge travel expenses from my base of operation in Atlanta, but only from available local office locations in Las Vegas or San Diego and travel can usually be held to a minimum.

Wayne W. Wisong, Attorney at Law

Admitted to California Bar: December, 1979

Admitted to Georgia Bar, December 1990

Contact information in profile

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Answered on 12/16/05, 9:09 am
Michael Olden Law Offices of Michael A. Olden

Re: Partner in business breaches verbal partnership

get to an attorney immediatly who is a specalist in trial work and business law - the other attorneys are correct you have number of calims based upon your fact situation as i have represented numbers in my 30 years of practice and if possible it may be settleable without a trial but that only time will tell -- do not delay do it now

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Answered on 12/16/05, 10:43 am
Phyllis Voisenat Phyllis Voisenat, Esq.

Re: Partner in business breaches verbal partnership

Since you have no formal entity, then you are considered to be a general partnership. California Law sets up the rights and responsibilities of the partners in absence of an agreement. General Partners have specific duties to each other. Each can be fully liable to third parties for actions taken in the course of the business.

The law imposes fiduciary duties among partners. Fiduciary duties include the following:

(1) The duty of loyalty, which includes:

(I) accounting to the partnership for any property, profit or benefit derived by the partner in operating the partnership business or using partnership information;

(ii) not dealing with the partnership as or for an adverse party, except in the partner's capacity as a lender to the partnership; and

(iii) not competing with the partnership until the partnership has dissolved.

(2) The duty of care, which is limited to avoiding grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.

(3) The duty of good faith and fair dealing, which underlies all contractual relationships.

Under the current UPA, unless the partners have agreed otherwise, a partner's withdrawal or resignation requires the partnership to dissolve and liquidate.

Therefore, your partnership must dissolve since they are withdrawing you. You need to get an attorney to enforce your rights, get an accounting, and get your share, as well as limiting and avoiding your liability. We could sent a cease and desist letter immediately, and then if they do not agree to this, file your lawsuit.

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Answered on 12/17/05, 6:40 pm


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